| Wed 29 Jun 2005, 9:52 | | Audited results of the Naspers group for the year |
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Naspers - Audited results of the Naspers group for the year ended 31 March 2005
Naspers Limited
(Registration number 1925/001431/06)
ISIN: ZAE000015889 JSE share code: NPN
(`Naspers`)
Provisional Report
Summary of the audited results of the Naspers group for the year ended 31 March
2005
GROUP OVERVIEW
Over the past few financial years the Naspers group has reported a trend of
strong earnings and cash flow growth. This trend evolved partly as a
consequence of the extensive investments made in earlier years now coming to
fruition, and partly because of favourable macro-economic conditions
prevailing in most of the major markets in which we operate.
This pattern of growth continued over the past year and is reflected in core
headline earnings that improved to R1 388 million. This growth was achieved
despite a modest increase of only 9% in revenues.
Another key determinant of growth over the past year was the performance of
the pay-television businesses, particularly the Greek operations which turned
from being loss-making to profitability. The print media business had an
exceptional year, buoyed by robust advertising revenues. Our investment in
Tencent, the Chinese-based instant messaging business, also delivered
satisfactory results.
Looking ahead, shareholders are cautioned that the rate of earnings growth
achieved over the past year will be impossible to maintain. This strong growth
rate came off a low base, and is influenced by exceptional economic conditions
in the major markets in which we operate. We have no indication how long such
favourable conditions will continue, other than the probability that at some
point the pace of economic growth will decline.
In addition, the application of South African Statements of Generally Accepted
Accounting Practice (`SA GAAP`) artificially boosted headline earnings in the
current year. R470 million of this relates to the creation of deferred tax
assets, and R360 million to accounting for foreign exchange contracts in terms
of AC 133. It is highly improbable that such an artificial boost to earnings
will recur and, as a consequence, it is likely that headline earnings will be
negatively impacted next year.
The group has a two-pronged strategy for growth. Firstly, we remain focused on
organically growing our existing businesses to their full potential. In
addition, we investigate new ventures within our field of expertise,
especially in developing countries, where we believe we can add value. We
believe, but cannot guarantee, that this approach will continue to deliver
growth into the future.
FINANCIAL REVIEW
Group revenues grew by 9% to almost R14 billion over the past year. This
modest growth was partly the result of the strong rand against most major
currencies, which dampens the impact of our offshore revenues. Offshore
revenues presently comprise 27% of our consolidated revenue base.
In addition, the change in accounting for our investment in Tencent also had
an impact on revenue growth. Up to 1 July 2004 we proportionately consolidated
the revenues of Tencent. After that, Tencent`s results have been equity
accounted. On a comparable basis the group`s revenue, excluding Tencent`s
contribution, increased by 12%.
Amortisation and impairment charges declined due to the adoption of AC 129 -
Intangible Assets, which resulted in the group ceasing the illogical
amortisation of goodwill previously demanded by accounting standards. Goodwill
is now reviewed annually and impaired only where appropriate. In the current
year adjustments to goodwill of R126 million were expensed due to the creation
of deferred tax assets.
Finance costs were substantially lower than last year, although this charge is
distorted by the inclusion of fair value adjustments on derivatives required
by AC 133, reflected in the analysis of finance costs below. However, as a
result of the reduced levels of debt in the group, net interest paid on
borrowings and finance leases was R102 million compared to R341 million
last year.
The equity accounted results comprises mainly our share of Tencent`s earnings.
As explained above, Tencent was equity accounted from 1 July 2004. On an
annualised basis, Tencent grew its net profits by 5%.
Exceptional items during the period amounted to R562 million net, comprising
mainly:
a) a book profit of R358 million flowing from the listing of Tencent;
b) a book profit of R216 million flowing from the restructuring of our pay-
television interests in Greece.
The tax charge on the income statement has been reduced by a net R470 million
because of the creation of deferred tax assets as required by SA GAAP.
The net effect of our results for the year is headline earnings of R2 167
million. Shareholders will recall that we have previously warned that
`headline earnings` has no credibility as an appropriate measure of true
sustainable operating performance. We prefer using `core headline earnings` as
a more appropriate measure of true sustainable operating performance. An
analysis of the difference between these two metrics is reflected below in the
section `calculation of core headline earnings`. A major item in the period
related to fair value adjustments on FECs required in terms of AC 133. It is
our view that this application of AC 133, which inflated headline earnings by
R360 million in the period, ignores economic reality.
In addition, we are required by SA GAAP to create deferred tax assets of R470
million flowing mainly from assessed losses in our Greek pay-television
operations. We believe it is imprudent to include this in a measure of
sustainable performance, as it artificially boosts headline earnings and is
unlikely to recur.
Adjusting for these and other items set out in the above analysis, we
calculate core headline earnings to be R1 388 million.
Cash flows were positively impacted by favourable trading results and cash
generated by operations improved to R2 368 million for the year.
SEGMENTAL REVIEW
Revenues and operating profits of the key business segments were as follows:
Revenue Ebitda
2005 2004 2005 2004
R`m R`m % R`m R`m %
Electronic
media 9 174 8 661 6 2 484 1 865 33
-pay
television 8 122 7 299 11 2 549 1 713 49
-technology 289 315 (8) (112) (9) 1 144)
-internet 763 1 047 (27) 47 161 (71)
Print media 4 782 4 141 15 849 602 41
-newspapers,
magazines
and printing 3 374 2 820 20 728 505 44
-book
publishing
and
private
education 1 408 1 321 7 121 97 25
Corporate
services 3 2 50 (42) (28) (50)
13 959 12 804 9 3 291 2 439 35
Operating profit before
amortisation and impairment Operating profit
2005 2004 2005 2004
R`m R`m % R`m R`m %
Electronic
media 2 074 1 385 50 1 894 919 106
- pay
television 2 211 1 336 65 2 069 1 063 95
- technology (128) (23) (457) (144) (63) (129)
- internet (9) 72 - (31) (81) 62
Print media 701 449 56 690 400 73
- newspapers,
magazines
and printing 610 388 57 606 373 62
- book
publishing
and private
education 91 61 49 84 27 211
Corporate
services (44) (30) (47) (44) (30) (47)
2 731 1 804 51 2 540 1 289 97
ELECTRONIC MEDIA
Pay Television
In aggregate, the pay-television subscriber base increased by 150 000
households over the period and the group now manages 2,3 million subscribers
across various countries and platforms. This growth in the subscriber base,
together with other factors mentioned below, resulted in strong operating
profits before amortisation.
The pay-television business in Greece turned around from a loss of R69 million
in the prior year to an operating profit before amortisation of R171 million.
Net growth in the region was 13 000 to reach 364 000 subscribers by year-end,
of which 60% are on the digital platform.
In South Africa, the subscriber base grew by 72 000 to 1,14 million. This was
achieved through compelling content on the DStv bouquet as well as the
introduction of a lower-priced decoder and a niche bouquet.
In sub-Saharan Africa, the subscriber base expanded by 44 000 to 336 000. This
growth came primarily from developing niche markets. In line with this
strategy, nine new Portuguese channels were added, resulting in Angola being
the fastest growing sub-Saharan market. In addition, 11 new channels were
introduced onto the French bouquet, which is primarily focused on the
Democratic Republic of Congo. We are substantially increasing our investment
in the production of local programming to grow the Nigerian market, the
largest in Africa.
In Thailand, the subscriber base grew by 24 000 compared to a decline in the
prior year. The total subscriber base is now 461 000 subscribers, of which 73%
are on the digital platform.
Technology
This segment, comprising our investment in Irdeto Access and Entriq, reflected
an operating loss before amortisation of R128 million as a consequence of the
intense development of new technology and services taking place in both
companies.
Irdeto`s development is focused on expanding its product base into mobile
devices and handheld digital video broadcasting. Entriq is investing in
content protection and subscriber management services for the rapidly growing
broadband market. We anticipate substantial investment in both businesses
during the years ahead.
Internet
The manner in which we reflect the financial performance of the internet
segment was impacted by the change of accounting treatment of Tencent,
reported above. As such, this segment reflects a decline in revenue and an
operating loss before amortisation of R9 million. Proportionately
consolidating the results of Tencent into this segment would convert this into
an operating profit before amortisation of R78 million.
In South Africa, MWEB had 325 000 dial-up and 19 000 broadband customers at
year-end. In addition, it services some 650 leased-line customers. In the rest
of Africa, services are being developed in Namibia, Nigeria and Zimbabwe.
MWEB Thailand extended its position as a leading portal in Thailand with 4,3
million unique visitors per month and 501 000 members of its services.
Sportscn, our sports portal in China, developed several new products during
the year. Sportscn attracts approximately 1,3 million unique daily visitors
and its SMS service has grown to 114 000 subscribers.
Tencent maintained its leading position in the online community in China, with
some 13 million peak simultaneous instant-messaging users and over 149 million
active user accounts. During the year, a wide range of new value-added
services was launched, including music streaming, games offerings and
expansion of the QQ.com portal.
Tencent also completed an initial public offering on the Hong Kong Stock
Exchange. In the year ahead, we expect earnings volatility and increased
competition from both local and foreign companies in this business.
PRINT MEDIA
Newspapers, Magazines and Printing
The newspaper and magazine businesses benefited from robust advertising growth
in South Africa. Revenues in this segment grew by 20%. Coupled to satisfactory
circulation levels and the growth of some new titles, this translated into
operating profit before amortisation of R610 million.
In the newspaper business, growth in circulation came mainly from the new
tabloid format titles launched over the past few years, ie Daily Sun, Sunday
Sun, Soccer Laduuuuuma and Son.
The magazine business also benefited from the advertising boom, although early
indications are that magazines` advertising growth rate has already started to
slow.
During the year under review, a number of titles were launched elsewhere on
the continent, specifically in Nigeria, Kenya and Angola.
The magazine and commercial printing business, Paarl Media, performed well in
a highly-competitive market.
MIH acquired a 9,9% strategic stake in Beijing Media Corporation (BMC), one of
China`s leading newspaper companies, with its flagship newspaper, the Beijing
Youth Daily. MIH is the first foreign company to become a substantial
strategic investor in a listed newspaper in China. Subsequent to listing on
the Hong Kong Stock Exchange, BMC has reported results in line with market
expectations.
Looking ahead, it is common knowledge that spending on print advertising is
cyclical and we remain uncertain about the duration of the current favourable
conditions. The rate at which new magazine titles have recently been launched
into an already competitive South African market is also a cause for caution.
Book Publishing and Private Education
The book publishing and private education business had a satisfactory year,
growing operating profit before amortisation by 49% to R91 million.
The book division continued the improvements recorded last year. In addition
to earnings growth, it maintained sound working capital control. The e-trader,
Kalahari.net and the ticketing business, Computicket, also recorded strong
growth.
The private education business had mixed results. While two of its three
divisions recorded improved trading results, the face-to-face business still
needs to adjust to the cost implications of complying with the rigorous
accreditation requirements being implemented by the department of education in
South Africa.
BLACK ECONOMIC EMPOWERMENT AND TRANSFORMATION
The group would like to assist the drive to incorporate previously
disadvantaged communities into the formal South African economy. In addition
to the contributions we have already made, Naspers is committed to developing
further broad-based empowerment initiatives. The finalisation of the ICT
sector charter and the codes of good practice are imminent. Once completed,
the group will finalise its own broad-based black economic empowerment (BEE)
initiative.
We are also proud of the community service provided by our various
publications, channels and platforms.
As part of our commitment to transformation, Naspers continues to invest in
employment equity. This was also reflected in recent appointments.
Dr Musa Shezi was recently appointed chief executive of Via Afrika. He was
general manager for school and academic publishing, where Dr Shezi
distinguished himself, before being appointed as the overall book division`s
chief executive. Imtiaz Patel was promoted to chief executive of SuperSport
South Africa. At the newspaper division, Themba Khumalo was appointed editor
of our largest publication, Daily Sun, and Andrew Koopman of the Cape Son.
We are also proud of the fact that 38% of our board already consists of people
from previously disadvantaged communities, and 25% are women. At the same time
we realise that our group will have to take transformation even further, and
we hope to do so within the next few years.
DIVIDEND
The board has recommended that the annual dividend be increased by 84% to 70
cents (previously 38 cents), per N ordinary share and 14 cents (previously 7
cents) per unlisted A ordinary share. If approved by the shareholders, the
dividends are payable to shareholders recorded in the books on 9 September
2005 and will be paid on 12 September 2005. The last date to trade cum
dividend will be on 2 September 2005.
ACCOUNTING POLICIES
The accounting policies used in this report comply with South African
Statements of Generally Accepted Accounting Practices and are consistent with
those applied in the prior year, except for:
- the adoption of AC 140 - Business Combinations and the revised statements of
AC 128 - Impairment of Assets and AC 129 - Intangible Assets. These
statements have been applied from 1 April 2004 in terms of their respective
transitional provisions. In terms of AC 129 goodwill is no longer amortised.
The effect of the adoption of AC 140 and AC 128 was immaterial for the
period under review
- the adoption of AC 501 - Accounting for South African secondary tax on
companies (STC), whereby the group is required to raise deferred tax assets
on unutilised STC credits to the extent that it is probable that it will be
utilised in the future. The group carried a deferred tax asset of R63
million relating to STC credits at 31 March 2005. The standard was applied
retrospectively with the restatement of comparatives.
A copy of the unqualified audit opinion of the auditors, PricewaterhouseCoopers
Inc., is available for inspection at the registered office of the company.
On behalf of the board
Ton Vosloo Koos Bekker
Chairman Managing director
Cape Town
29 June 2005
Abridged Income Statement
Year ended Year ended
31 March 2005 31 March 2004
R`m R`m
Revenue 13 959 12 804
Earnings before interest, tax,
depreciation and amortisation (Ebitda) 3 291 2 439
Depreciation (560) (635)
Operating profit before
amortisation and impairment 2 731 1 804
Amortisation and impairment
of intangible assets (191) (484)
Impairment of programme rights - (31)
Operating profit 2 540 1 289
Net finance costs (224) (664)
Share of equity-accounted results 96 3
Exceptional items 562 48
Profit before taxation 2 974 676
Taxation (254) (172)
Minority interest (120) (129)
Net profit attributable to shareholders 2 600 375
Earnings per N ordinary share (cents)
- basic 938 145
- fully diluted 882 141
Headline earnings per N ordinary share
(cents)
- basic 781 303
- fully diluted 735 295
Core headline earnings per
N ordinary share (cents) 501 208
Proposed dividend per
N ordinary share (cents) 70 38
Proposed dividend per
A ordinary share (cents) 14 7
Number of shares issued (`000)
- at year-end 282 560 261 619
- weighted average for the period 277 294 257 814
- fully diluted weighted average 294 663 265 188
Abridged Balance Sheet
31 March 2005 31 March 2004
R`m R`m
ASSETS
Non-current assets 8 454 6 382
Property, plant and equipment 3 352 3 274
Goodwill and other intangibles 2 966 2 491
Investments and loans 1 220 70
Programme and film rights 48 40
Deferred taxation 868 507
Current assets 7 118 6 761
Total assets 15 572 13 143
EQUITY AND LIABILITIES
Share capital and reserves 6 630 3 231
Minority interest 223 237
Non-current liabilities 2 954 2 873
Capitalised finance leases 1 785 1 921
Liabilities - interest-bearing 423 572
- non-interest-bearing 114 129
Post-retirement medical liability 161 171
Deferred taxation 471 80
Current liabilities 5 765 6 802
Total equity and liabilities 15 572 13 143
Net asset value per N ordinary share (cents) 2 346 1 234
Abridged Statement of Changes in Equity
Year ended Year ended
31 March 2005 31 March 2004
R`m R`m
Balance at beginning of year 3 183 3 138
Effect of adopting AC 501 48 45
As restated 3 231 3 183
Movement in treasury shares 38 79
Share capital and premium issued 761 -
Foreign currency translation 44 (299)
Movement in fair value reserve 41 (9)
Movement in cash flow hedging reserve 21 (20)
Net profit attributable to shareholders 2 600 375
Dividends (106) (78)
Balance at end of year 6 630 3 231
Abridged Cash Flow Statement
Year ended Year ended
31 March 2005 31 March 2004
R`m R`m
Cash generated by operations 2 368 1 746
Dividends paid (204) (109)
Cash flow from operating activities 2 164 1 637
Cash flow from investment activities (877) (555)
Cash flow from financing activities (310) (555)
Net movement in cash and cash equivalents 977 527
Analysis of Exceptional Items
Year ended Year ended
31 March 2005 31 March 2004
R`m R`m
Profit on sale of investments - 23
Profit on dilution of interests in
investments 567 8
Asset (impairment)/reversal (5) 17
562 48
Calculation of Core Headline Earnings
Year ended Year ended
31 March 2005 31 March 2004
R`m R`m
Net profit attributable to shareholders 2 600 375
Adjusted for:
- exceptional items after tax and minorities (567) (44)
- impairment of programme rights - 31
- amortisation and impairment of goodwill 134 420
Headline earnings 2 167 782
Adjusted for:
- currency translation differences 11 (51)
- creation of deferred tax assets (470) (204)
- amortisation of intangible assets 40 54
- AC 133 fair value adjustments (360) (44)
Core headline earnings 1 388 537
Supplementary Information
31 March 2005 31 March 2004
R`m R`m
Net finance costs 224 664
- net interest (received)/paid (70) 154
- interest on finance leases 172 187
- net foreign exchange differences 14 (63)
- net fair value adjustments
on derivatives (AC 133) 108 386
Investments and loans 1 228 494
- listed investments 1 115 137
- unlisted investments 113 357
Market value of listed investments 3 208 137
Directors` valuation of
unlisted investments 113 357
Commitments 2 413 1 743
- capital expenditure 447 394
- programme and film rights 1 483 995
- network and other services commitments 385 165
- decoder commitments 98 189
Operating lease commitments 1 511 631
Directors
T Vosloo (Chairman), JP Bekker (Managing director), JJM van Zyl, E Botha, LN
Jonker, NP van Heerden, SJZ Pacak, BJ van der Ross, GJ Gerwel, HSS Willemse, F
du Plessis, FTM Phaswana, RCC Jafta
Company secretary
GM Coetzee
Registered Office
40 Heerengracht, Cape Town, 8001
(PO Box 2271, Cape Town, 8000)
Transfer Secretaries
Ultra Registrars (Proprietary) Limited
Fifth Floor, 11 Diagonal Street,
Johannesburg, 2001
(PO Box 4844, Johannesburg, 2000)
ADR Programme
The Bank of New York maintains a Global BuyDIRECT(TM) plan for Naspers
Limited. For additional information, please visit The Bank of New York`s
website at www.globalbuydirect.com or call Shareholder Relations at 1-888-BNY-
ADRS or 1-800-345-1612 or write to: The Bank of New York Shareholder Relations
Department - Global BuyDIRECT(TM) Church Street Station,
PO Box 112588, New York, NY 10286-1258 USA.
Date: 29/06/2005 09:00:23 AM
Produced by the JSE SENS Department
